Question:

If a company purchases x amount of stock in a corp for y amount of dollars, how much revenue does it make?

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Here's the Scenario:

Smith Corporation purchased 225,000 shares of Barnes Corporation common stock on January 2, 20X8 for $540,000.

Barnes Corporation has 600,000 shares outstanding. Barnes Corporation earned net income of $360,000 and paid dividends of $100,000 during 20X8.

The question is, how much revenue will be recorded by Smith Corporation from its investment in Bares Corporation?

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1 ANSWERS


  1. The only income that Smith Corp. received from Barnes Corp. is the dividend payment of $0.166/share ($37,500). The rest of the net income although attributable to shares held by Smith Corp. is not recorded as income for Smith Corp.

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